Some of the transactions of Torres Company during August are listed below. Torre

Question

Some of the transactions of Torres Company during August are listed below. Torres uses the periodic inventory method.

August 10 Purchased merchandise on account, $20,300, terms 2/10, n/30.
13 Returned part of the purchase of August 10, $1,100, and received credit on account.
15 Purchased merchandise on account, $25,300, terms 1/10, n/60.
25 Purchased merchandise on account, $33,100, terms 2/10, n/30.
28 Paid invoice of August 15 in full.

(a) Assuming that purchases are recorded at gross amounts and that discounts are to be recorded when taken:

(1) Prepare general journal entries to enter the transactions.

Acct. Titles & Explanation

(2) Prepare the adjusting entry necessary on August 31 if financial statements are to be prepared at that time.(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(b) Assuming that purchases are recorded at net amounts and that discounts lost are treated as financial expenses:

(1) Prepare general journal entries to enter the transactions.

(2) Prepare the adjusting entry necessary on August 31 if financial statements are to be prepared at that time

Date

Acct. Titles & Explanation

Debit & Credit Aug 10 Aug 13 Aug 15 Aug 25 Aug 28

Explanation / Answer

ans)

1. Aug 10 Purchases 20300

Accounts payable 20300

Aug 13 Accounts payable 1100

Purchases returns and allowances 1100

Aug 15 Purchases 25300

Accounts payable 25300

Aug 25 Purchases 33100

Accounts payable 33100

Aug 28 Accounts payable 25300   

Cash 25300

b)

1. Aug 10 Purchases 19894

Account payable (20300 x (100% - 2%) 19894

Aug 13 Accounts payable (1100 X (100% - 2%) 1078

Purchases returns and allowances 1078

Aug 15 Purchases 25047

Account payable 25047

(25300 X (100% - 1%)

Aug 25 Purchases 32438

Account payable (33100 X (100% - 2%) 32438

Aug 28 Accounts payable 25047

Purchases discount (25300 X 1%) 253

cash 25300

2) Aug 31 Purchases discount lost (20300 - 1100) X 2% 384

Accounts payable 384

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